Commonwealth Fund Puts Impact Of Young Adult Marketplace Participation In Perspective

Will men and women ages 19 to 34—a group uninsured at disproportionately high rates but generally healthier than older adults—enroll in health insurance marketplace plans at a rate high enough to ensure the marketplaces’ success? While young adult participation is important for the stability of the marketplaces and 2015 premiums, it was, and will continue to be, only one of many factors that affect premiums, according to participants at a meeting coordinated by The Commonwealth Fund that included health insurance actuaries, health plan representatives, researchers, and federal officials. The Commonwealth Fund report, Young Adult Participation In the Health Insurance Marketplaces Just How Important Is It?, concluded that there is no single “right” rate of young adult participation that will guarantee success. In fact, it was the health status of all age groups that health plan actuaries in attendance viewed as being more important in their pricing decisions.

Whether men and women ages 19 to 34 will enroll in the Patient Protection and Affordable Care Act’s (ACA) health insurance marketplace health plans at a rate high enough to ensure that the marketplaces are a success has been the subject of considerable attention, The Commonwealth Fund points out. If participation by young adults is less than what insurers expected when they set premiums for 2014, what are the implications for the stability of the marketplaces and insurance premiums in 2015? In late January 2014, The Commonwealth Fund invited a group of health insurance actuaries, health plan representatives, researchers, and federal officials, including Christen Linke Young, health policy advisor at the White House; Jeanne Lambrew, deputy assistant to the president for health policy at the White House; Cori Uccello, senior health fellow at the American Academy of Actuaries; Linda Blumberg, economist and senior fellow at The Urban Institute; and Matt Fiedler, senior economist, council of economic advisors at the White House, to discuss these and related issues.

It was agreed upon by actuaries and researchers attending the meeting that participation of young adults in the marketplaces is important for stability of the marketplaces and 2015 premiums, but there also was consensus that young adult participation will continue to be one of many different factors that affects premiums of marketplace plans. Health status was the most important factor influencing pricing decisions, said health plan actuaries, not young adult participation.

The Commonwealth Fund predicts that insurers’ gains or losses for 2014 and the effect on 2015 premiums will depend on how actual experience differs from what insurers expected. The report further explained that, in setting premiums, some health plans develop their own projections of young adult enrollment based on modeling of expected behavior under the health reform law’s coverage provisions and the individual mandate, making it difficult to come up with a single right percentage for young adult participation.

The report also stated that the young adult enrollment rate is less important than health status of all enrollees because carriers can still price an individual’s policy based on his or her age within the law’s three-to-one age bands, allowing carriers to charge older adults as much as three times what they charge younger adults. This is less pricing variation than most states allowed prior to 2014, but insurers can nevertheless still make adjustments to premiums based on age. Thus, even if enrollment among young adults is less than projected, it will potentially have less of an effect on insurers’ gains or losses, according to the meeting participants, (because insurers can no longer charge people premiums based on their health), than will enrollment that turns out to be less healthy than expected.

For the 2015 plan year that starts next January, health plans must file premiums in the second quarter of 2014, so they would have about three months of claims experience on which to base their premiums. If 2014 premiums fall short for purposes of 2014 enrollment, it is likely, said The Commonwealth Fund, that they will adjust their assumptions about plan risk pools so that 2015 premiums are at a sustainable level.

Meeting participants agreed that factors that might limit losses include the ability to price based on age, and the ACA’s risk-sharing programs, which limit high-cost claims and offset insurer. The Commonwealth Fund predicts that the degree to which premiums increase this year is expected to be tempered, among other factors, by the health reform law’s premium rate review provision, which requires health plans to justify premium increases of 10 percent or more, and the medical loss ratio requirement, which requires that plans spend a set percentage of their premiums on medical care, as opposed to profits and administrative expenses.

Although health policy analysts have conceded that lower-than-projected enrollment of young adults may lead to premium adjustments by carriers, The Commonwealth Fund reports that those same analysts say it will not be the most important factor. Not even extreme lower enrollment among young adults is expected to “lead to a so-called premium death spiral and market failure,” the report advised.

In 2014, premiums for the marketplace plans came in lower than what had been projected by the Congressional Budget Office, largely, according to the actuaries in the Commonwealth Fund meeting, because of the extensive offering of narrow provider networks, the restructuring of provider payment, and benefit design. The report further states that, while some degree of uncertainty will continue in health plan rate-setting into 2015, actuaries and researchers predict a gradual stabilization of the marketplaces and greater certainty among health plans when setting premiums in 2016 and beyond.

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